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How Much Revenue Alexa Could Generate for Amazon

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Alexa’s revenue estimate

Amazon (AMZN) seems to be nurturing a money machine in Alexa, its voice assistant. If we can go by analysts’ estimates from RBC Capital Markets, Alexa could turn more than $10.0 billion in new revenues for Amazon by 2020.

Alexa is the technology behind Amazon’s smart speaker and home automation hub called Amazon Echo. It’s also available in other versions such as Echo Tap and Echo Dot. Alphabet’s (GOOGL) Google has a similar device called Google Home, powered by an Alexa equivalent called Google Home. However, Alexa has significantly more skills than Google Home and other rivals such as Siri by Apple (AAPL), Cortana by Microsoft (MSFT), and Facebook M by Facebook (FB).

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Alexa revenue sources

According to RBC analysts, one of two main Alexa revenue sources is device sales. Alexa-based devices are being used in a variety of applications such as operating appliances in a home through voice commands. Alexa devices are also being tried as tools for remotely operating data centers, especially in resource provisioning functions. The other potential major source of Alexa revenue is voice-driven online shopping on Amazon’s retail site.

Analysts also believe that as Alexa grows more popular, more developers will be attracted to it, and those developers could pay to use Amazon’s native cloud computing platform to build Alexa skills as a sign of goodwill. That would lead to Alexa-driven AWS (Amazon Web Services) revenues. AWS revenues rose 47.0% from a year earlier to $3.5 billion in 4Q16, as you can see in the above graph.

More Alexa skills could also mean more developer competition for users of the skills. As such, Amazon could charge developers for prominent placement of their apps (applications) on the Alexa marketplace, yielding additional revenues for the company.

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